Student Loan Overhaul: What Borrowers Necessitate to Know in 2026
Borrowers, prepare for significant changes to federal student loans. As of July 1, 2026, repayment options will look drastically different as the Trump administration implements sweeping changes to the student loan system. These changes impact the nearly 43 million Americans who collectively owe approximately $1.6 trillion in federal student loan debt.
The End of SAVE and Other Popular Plans
At the heart of this overhaul is the Department of Education’s (DOE) settlement to end President Joe Biden’s Saving on a Valuable Education (SAVE) repayment plan. If approved by the courts, this will resolve litigation from several states arguing the Biden administration overstepped its authority. The One Sizeable Beautiful Bill Act (OBBBA) will likewise phase out other popular repayment plans.
A Historical Shift: From National Security to Debt Crisis
The federal government’s involvement in education aid began with the launch of Sputnik in 1957, prompting the National Defense Education Act of 1958. This aimed to bolster national security through education. From 1960 to 1970, college attendance more than doubled as a result. However, the student loan program has since grown exponentially, becoming the nation’s second-largest type of consumer debt, accounting for 9% of the nation’s debt and increasing 42% in just 12 years.
What Happens to Existing Borrowers?
Approximately 7 million borrowers enrolled in SAVE will be transitioned to other repayment options over the next few years, with the plan slated for complete shutdown by 2028. Many borrowers are already experiencing the re-accumulation of interest on their balances as the program’s benefits diminish. Those currently enrolled in Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) will be required to choose the standard Income-Based Repayment Plan (IBR) or a Repayment Assistance Plan (RAP) by July 1, 2028, or be automatically moved into RAP.
Latest Repayment Options: IBR and RAP
The OBBBA introduces two new core repayment plans for loans taken out on or after July 1, 2026:
- Income-Based Repayment Plan (IBR): A revised version of the standard income-based plan with fixed monthly payments and a 10-year repayment term.
- Repayment Assistance Plan (RAP): Payments are based on adjusted gross income (AGI), with a minimum yearly payment of 1% to 10% of AGI, and a minimum monthly payment of $10 ($120 annually) for those who qualify. Unpaid interest will be forgiven monthly, and loans may be forgiven after 30 years. A $50-per-child discount is also included.
Changes to Loan Amounts for New Borrowers
Significant changes are coming for Parent PLUS and Graduate PLUS loans. Grad PLUS loans, which previously allowed students to borrow the full cost of tuition, will be eliminated. Graduate students will now be limited to $20,500 per year, with medical, law, and other professional school students capped at $50,000 annually. Parent PLUS borrowers will be limited to borrowing up to $65,000 per child.
Wage Garnishment and Loan Forgiveness
The Trump administration announced plans to resume wage garnishment for borrowers in default in December 2025, but the start date has been postponed indefinitely. Public Service Loan Forgiveness (PSLF) remains available for those working full-time in qualifying government or nonprofit jobs, though the administration has narrowed eligibility criteria, stating it will exclude employers with “substantial illegal purpose.”
Did you know?
The federal student loan program is the second-largest source of consumer debt in the United States, trailing only mortgage debt.
The Debate: Relief vs. Responsibility
The changes have sparked debate. Supporters, like Under Secretary of Education Nicholas Kent, argue that borrowers must repay their loans and taxpayers shouldn’t bear the cost of “irresponsible student loan policies.” Critics, such as Rep. Alexandria Ocasio-Cortez, contend the changes will make financing education harder for students.
FAQ
Q: What is the SAVE plan?
A: The Saving on a Valuable Education (SAVE) plan was an income-driven repayment plan launched in 2023, capping monthly payments based on income and forgiving remaining balances after a set period. It is being phased out.
Q: What is the OBBBA?
A: The One Big Beautiful Bill Act phases out several existing repayment plans and introduces new options, including the Income-Based Repayment Plan (IBR) and the Repayment Assistance Plan (RAP).
Q: Will I still be able to get loan forgiveness?
A: Yes, Public Service Loan Forgiveness (PSLF) remains an option, but eligibility criteria have been narrowed. Loan forgiveness is also possible under the RAP after 30 years of payments.
Q: What should I do if I have student loans?
A: Stay informed about the changes and explore your repayment options. Contact your loan servicer for personalized guidance.
Pro Tip: Regularly check the Federal Student Aid website (https://studentaid.gov/) for the latest updates and resources.
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